Wednesday, December 31, 2008

End of the year 2008

Unfortunately I've missed quite a bit of time blogging.

However, it is always interesting when you take a break from intensely following the markets. All the changes in the markets seem much more exaggerated and certainly can bring new insight that one might miss by getting caught up in daily events.


One of the events that sticks out to me the most was the rapid drop in oil prices. Considering I was trading oil securities back in October (which i have yet to post my final trading results) the speed at which crude oil feel is quite shocking. If one were to consider that long term oil charts were in an overall down trend, and that macroeconomic fundamentals were weak; this move may not be surprising at all. Even if an analyst were to consider oil prices from an equities perspective, if industries heavily on oil were expecting poor earnings or even if one were to follow the general job market could have all found support for shorts on oil. Considering these events separate or connected all still shows evidence of continued falling oil prices, but this may all seem quite useless since everything is clearer in retrospect. Though, one can take this experience and apply it to future analysis.


There is much to blog about currencies, I will briefly summarize some major pairs. Prior to 2008 the EUR/USD from around 2005 to July of 2008 was when the trend changed. July 2008 seems to be a break in trend for most pairs. The pair trended downward for the whole year until about December when it almost returned prices levels of the beginning of the year. This would not be a surprise if one were closely following weekly charts. Another chart that experienced a similar pattern is the AUD/USD ( upward trend prior to 08/2008 then a reverse trend in 12/08) except price levels did not return to similar levels of the beginning of the year. what worries me is that many other major pairs are just as extended as the EUR/USD and the AUD/USD however have yet to change downward trend. However, into 2009 i certainly expect most major trends to reverse from downward pattern. Weather it be a whipsaw or a true change in trend will depend on economic situations.

I feel that from a brief look at the economy, if there is any reverse trends in major pairs it would have to be temporary considering the job markets, which will probably also strongly affect the equity markets and in turn also major equity indexes. Unfortunately I do not have much more time to explain all of this as I must catch up on other works for school...


Lastly I will briefly mention the S&P500, the past 3 months have not been to surprising, though if one were trading the actually index it would be quite a ride as I myself did not do too well trading S&P500 futures. Price movements in the shorter term charts (1 year charts) seems to show bullish patterns of possible support and serious of higher highs and higher lows.

Quick Close for 2008

I would like again to emphasize, such movements of upward bullish moves in currency markets (reverse trends in EUR/USD and AUD/USD) along with short term bullish formations in the S&P500 shows that economy does not equate to financial markets. Though as I have mentioned before in bear markets the correlation between economic activity and financial market is stronger. If one can find more divergence between financial markets and economic data might suggest changes in trend and/or sentiment. This might lead to enough evidence to use a contrarian approach to trade in the first quarter 2009.
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